The Xbox 720 is the industry nickname for Microsoft’s next big addition to the console gaming and multimedia entertainment market. Given the popularity of the Xbox 360, it was inevitable that Microsoft would want to build on that success with a new and superior product and the company confirms that it began considering the next generation almost as soon as the current Xbox began to ship.

Rivals Sony have let slip that their own PlayStation 4 will also be shipping sometime in the next couple of years, estimating that it will hit the stores not much later than the Xbox 720 (codenamed “Durango”). Sony have a longer and more impressive track record as a purveyor of addictive games console technology than Microsoft and there’s considerable loyalty among PS gaming fans. Future purchasers will be looking both at the new consoles’ speed and graphical excellence from a gameplay perspective; but the winner in battle of the consoles will also need to compete on multimedia capabilities.

One hot rumour is that the new Xbox will incorporate a Blu-Ray drive. When the Xbox 360 first shipped, the format wars were still ongoing and Microsoft was a stanch member of Team HD DVD. Now that Blu-Ray has soundly trounced its rivals to become the reigning multimedia format, it seems an absolute certainty that both consoles will include Blu-Ray.

Another solid bet is that the new Xbox will have HDMI and Wi-Fi as standard. The Xbox 360 Elite offers HDMI; as of 2012, Wi-Fi also comes as standard. More to the point, the The PS3 already comes with Wi-Fi Ethernet and Bluetooth so we can reasonably assume that the PS4 will, too. To remain competitive, the Xbox 720 needs to match these capabilities.

The Xbox 720’s processor is another major focus for speculation. Rumours that the PS4 would be sticking with the PS3’s Cell processor have been quashed and industry insiders now believe it will employ an AMD x64 CPU. The Xbox 720 will need to compete with that to attract serious gaming enthusiasts. It’s probable that Microsoft will turn to its partner IBM for the latest in processor technology. IBM’s Power6 chip, a dual core 4.7GHz server CPU, would give the Xbox a serious edge over its rival. Rumour has it that the Xbox 720 will contain two GPUs for faster graphics.

Fans who have amassed a large collection of games and a virtual trophy cabinet of achievements needn’t fret. The Xbox 720 will almost certainly be backwards compatible, allowing you to play all your existing games, and achievements you’ve unlocked on the Xbox 360 will probably be carried over too. The Xbox 360 still has a lot to give and Microsoft will certainly continue supporting it after the Xbox 720’s release.

The new console could theoretically stand the gaming industry on its head, capitalising on the ground that Microsoft has already gained in the gaming and entertainment market. A firm launch date has yet to be announced but 2014 seems a likely estimate.